Archive for the 'Laws and Court Decisions' Category

[SP No. 54751. April 25, 2001]

SAVE MORE DRUG/CARMEN TAN, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER, MANUEL ASUNCION, AND CARMENCITA TAPIADOR, respondents.

  1. LABOR LAW; LABOR STANDARDS; WAGE RATIONALIZATION ACT (RA 6727); EXEMPTION FROM COVERAGE OF WAGE RATIONALIZATION ACT NOT AUTOMATIC; FAILURE TO APPLY FOR EXEMPTION, EFFECT OF.—Exemption from the coverage of the “Wage Rationalization Act”, is not automatic even though under Section 1 (b). Chapter 1 thereof employers in the retail and service establishments regularly employing less than 10 workers are exempted from the statutory minimum wages fixed by the Regional Tripartite & Wage Board (RTWB). for under Section 4 (c) and Section 15 (1) of the same Chapter, it is necessary that the employer must first apply for exemption with the RTWB failing which it is required to comply with the wage orders issued by the Board. The same holds true with respect to exemptions from coverage of the service incentive leave pay law as Murillo, et al. vs. Sun Valley Realty Inc., 163 SCRA 271, 277 [1988] holds that it is incumbent upon the employer to show that he belongs to that class exempted by law from payment thereof.
  2. ID.; ID.; ID.: THIRTEENTH MONTH PAY (PD 85); EMPLOYERS EXEMPTED FROM PAYING THEIR EMPLOYEES A THIRTEENTH MONTH PAY— Under the Revised Guidelines on the Implementation of the 13th Month Pay dated November 16, 1987 implementing Presidential decree No. 85 dated December 12, 1975 “requiring all employers to pay THEIR EMPLOYEES A THIRTEENTH MONTH PAY”, BS amended by Memorandum Order No. 28 dated August 13, 1986, the following employers fall under the exemptions: 1. The Government and any of its political subdivisions including government owned and controlled corporations, except, those corporations operating essentially as private subsidiaries of the Government. 2. Employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of this issuance. 3. Employers of household helpers and persons in the personal services of another in relation to such workers. 4. Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount of performance of a specific work. irrespective of the time consumed, in the performance thereof, except
    where the workers are paid on a piece-rate basis in which case the employer shall grant the required 13th month pay to such workers.
  3. ID.; ID.; TERMINATION: ABANDONMENT: RETURN TO WORK ORDER ISSUED AFTER EMPLOYEE FILED COMPLAINT FOR ILLEGAL DISMISSAL NEGATE CLAIM OF ABANDONMENT.—With respect to the legality of private respondent’s dismissal: Petitioners failed to establish their claim that private respondent abandoned her work by not complying with the return to work letter dated July 15, 1997. That said letter was mailed only after the complaint for illegal dismissal was instituted by private respondent indeed indicates that. as the Labor Arbiter observed, was a mere afterthought.

ORIGINAL ACTION in the Court of Appeals.

The facts are stated in the opinion of the Court.

Jeni Esther R. Tugade-Abrazaldo for petitioners.

Apolinario C. Barrios for complainant.

CARPIO MORALES, J.:

Petitioners CARMEN TAN and SAVE MORE DRUG appeal by way of certiorari under Rule 65 of the 1997 Rules on Civil Procedure the Resolutions of February 24 and July 27, 1999 of the National Labor Relations Commission (NLRC) affirming the Decision of the Labor Arbiter finding Carmencita Tapiador (private respondent) illegally dismissed and denying the motion for reconsideration of the Resolution of February 24, 1999, respectively.

Petitioner Save More Drug, a retail store of pharmaceutical products of which petitioner CARMEN G. TAN is the proprietor, hired private respondent in 1991 as one of its sales clerks in its Don Antonio Heights-Quezon City outlet.

On July 8, 1997, petitioners suspended private respondent for a period of three days ending on July 11, 1997 on account of her habitual absenteeism and tardiness – a fact admitted by private respondent in her handwritten letters dated September 15, 1995, January 19, 1996, June 4, 1996, and November 9, 1996 (Annexes “I” – “L” of Petition, pp. 42-45).

Private respondent, claiming that after serving her suspension which, so she claims, was not on account of her tardiness and absenteeism but for failure to “record in a yellow listing three (3) items bought by customer before it was punched in the cash register by the cashier”, petitioners refused to “reinstate” her, filed on July 18, 1997 a complaint against petitioners for illegal dismissal, underpayment of wages, non-payment of service incentive leave and thirteenth month pay with the Labor Arbitration Branch of the NLRC.

Controverting private respondent’s allegations, petitioners submitted the return to work letter of their counsel mailed on August 6, 1997, among other documents.

By Decision of June 19, 1998, the Labor Arbiter found for private respondent. The dispositive portion of the decision reads:

Wherefore, the respondents are hereby ordered to reinstate the complainant with full backwages from the time her salary was withheld until she is actually reinstated. To this date, her backwages has reached to P57.418.00. The respondents are likewise ordered to pay the complainant the sum of P 24,127.48 as salary differential; P23.375.00 as service incentive leave pay and P 2,574.00 as 13th month pay.

In finding for private respondent, the Labor Arbiter took into account the following considerations, inter alia:

  1. The complaint for illegal dismissal was filed on July 16, 1997, before August 6. 1997, the date of mailing of petitioners’ counsel’s return-to-work letter dated July 15, 1997, and

  2. Since petitioners received the summons and a copy of the complaint for illegal dismissal on July 29, 1997, the return-to-work letter was a mere afterthought to legitimize the refusal to accept private respondent back to work.

The NLRC affirmed the Decision of the Labor Arbiter in its Decision of February 24, 1999 and denied petitioner’s Motion for Reconsideration thereof in its Resolution of July 27, 1999.

Hence, the present petition.

Petitioners asseverate that private respondent was not illegally dismissed and that she is not entitled to salary differentials, 13th month pay, and service incentive leave pay because petitioner Save More Drug is into retail business and employs less than 10 employees, hence, exempted form the coverage of the pertinent Wage Orders and payment of service incentive leave under the Labor Code.

The petition fails.

With respect to the legality of private respondent’s dismissal: Petitioners failed to establish their claim that private respondent abandoned her work by not complying with the return to work letter dated July 15, 1997. That said letter was mailed only after the complaint for illegal dismissal was instituted by private respondent indeed indicates that, as the Labor Arbiter observed, was a mere afterthought.

It surfaces that petitioner are liable to pay backwages.

On private respondent’s entitlement to monetary benefits: Petitioners did not assert that private respondent was not a regular employee.

Neither did petitioners present proof during the proceedings before the Labor Arbiter that the drug store business is one of those exempted from the coverage of Republic Act No. 6727. otherwise known as the “Wage Rationalization Act” and from paying service incentive leave pay and 13th month pay.

Exemption from the coverage of the “Wage Rationalization Act”, is not automatic even though under Section 1 (b). Chapter 1 thereof employers in the retail and service establishments regularly employing less than 10 workers are exempted from paying the statutory minimum wages fixed by the Regional Tripartite & Wages Board (RTWB), for under Section 4 (c) and Section 15 (1) of the same Chapter, it is necessary that the employer must first apply for exemption with the RTWB failing which it is required to comply with the wage orders issued by the Board. The same holds true with respect to exemptions from coverage of the service incentive leave pay law as Murillo et al. v. Sun Valley Realty Inc., 163 SCRA 271, 277 [1988] holds that it is incumbent upon the employers to show that he belongs to that class exempted by law from payment thereof.

As for payment of the 13th month pay, the Court finds that under the Revised Guidelines on the Implementation of the 13th month pay dated November 16, 1987 implementing Presidential Decree No. 85 dated December 12, 1975.

REQUIRING ALL EMPLOYERS TO PAY THEIR EMPLOYEES A THIRTEENTH MONTH PAY“, as amended by Memorandum Order No. 28 dated August 13, 1986, petitioner drugstore does not fall under any of the following exemptions:

  1. The Government and any of its political subdivisions including government owned and controlled corporations, except, those corporations operating essentially as private subsidiaries of the Government.

  2. Employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of this issuance.

  3. Employers of household helpers and persons in the personal service of another in relation to such workers.

  4. Employers of those who are paid on purely commission, boundary, or task-basis, and those who are paid a fixed amount of performance of a specific work, irrespective of the time consumed, in the performance thereof, except where the workers are paid on a piece-rate basis in which case the employer shall grant the required 13th month pay to such workers.

In fine, petitioners had no just or authorized cause in dismissing private respondent from her post. They are therefore, obliged to reinstate her.

If reinstatement is no longer feasible, however, as where the parties have already strained relations, then private respondent is to be awarded a separation pay computed at one month per year of service plus backwages (Reformist Union of RB Liner Inc. v. NLRC, 266 SCRA 728 [1996] citing Sealand Service Inc. v. NLRC, 206 SCRA 701, 710 [1992]).

WHEREFORE, the petition is hereby DENIED. The assailed Resolutions are affirmed, with modification, in accordance with the statement in the immediately preceding paragraph, that if reinstatement is no longer feasible, petitioners are ordered to pay private respondent separation pay at the rate of one month salary per year of service.

SO ORDERED.

Rivera and de Guia-Salvador, JJ., concur.

Petition denied. Resolutions affirmed with modification.

CERTIFICATION

I hereby certify that this Decision was reached after due consultation among the members of this Division in accordance with the provisions of Section 13, Article VIII of the Constitution.

(SGD.) CONCHITA CARPIO MORALES
Chairman

[SP No. 51780. May 12, 2000]

SOLIDBANK CORPORATION, DEOGRACIAS N. VISTAN, RENE V. JAZMINES, DLWATA C. CASTANOS AND JORGE S. PAYAWAL, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, (SECOND DIVISION) AND DANILO H. LAZARO, respondents.

  1. COMMERCIAL LAWS; CORPORATION; CORPORATE FICTION; PIERCING THE VEIL OF CORPORATE ENTITY; SUBSTITUTION OF PARTIES FOR PURPOSES OF EXECUTION; NOT ALLOWED IN THE ABSENCE OF PROOF THAT THE NEW CORPORATION HAS IN FACT ASSUMED THE ENTIRE BUSINESS OF THE OLD CORPORATION AND IS CONTINUING THE SAME AS THE NEW OWNER THEREOF—The term “corporate officer” refers only to officers of a corporation who are given that character either by the Corporation Code or by the corporation’s by-laws (Ongkingco vs. NLRC, 270 SCRA 613: Tabang vs. NLRC, 266 SCRA 462). There are in fact other “officers” in a corporation whose positions are not provided in the Corporation Code or in the corporation’s by-laws such that the status of these so-called “officers” is that of ordinary employees of the corporation.
  2. ID.; ID.; ID.; LABOR LAWS; ILLEGAL DISMISSAL; JURISDICTION; COMPLAINT FOR ILLEGAL DISMISSAL INVOLVING A VICE PRESIDENT OF A BANK WHO IS NOT PROVEN TO BE A CORPORATE OFFICER VESTS WITH THE LABOR ARBITER AND NOT WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC).— The burden is on herein petitioners to show proof that respondent Lazaro in fact is one of its corporate officers defined in the Corporation Code or as provided in their company by-laws to support its claim that the Securities and Exchange Commission has the proper jurisdiction over the illegal dismissal case filed by respondent Lazaro. In its Motion to Dismiss the complaint, however, petitioners failed to show any evidence on that matter. Petitioners, therefore, failed to substantiate their claim that the NLRC has no jurisdiction over the complaint. Respondent Lazaro transferred to petitioner Bank in 1992 and was appointed as Head, Binondo Cash Department or Chief Cashier with AVP level. In May 1993, respondent Lazaro was appointed as Head of the Branch Banking Group in the Southern Luzon Region (Region VI). In December 1993, he was designated as Head of Branch Administration and Support Division concurrent with his other position. Later, in January 1994, he was again promoted to the rank of Vice President. Evidently, respondent Lazaro rose from the ranks as an ordinary employee of the Bank. Although he was promoted to higher positions, there is no showing that he became a member of the Board of Directors or even a stockholder of the Corporation. Clearly, therefore, he was not a corporate officer under either the Corporation Code or the by-laws of the Solidbank, hence the complaint for illegal dismissal filed by respondent Lazaro falls within the jurisdiction of the Labor Arbiter, not of the Securities and Exchange Commission.

ORIGINAL ACTION in the Court of Appeals.

The facts are stated in the opinion of the Court.

Delos Reyes Banag Briones & Associates for petitioners.

Solicitor General Ricardo P. Galvez, Assistant Solicitor General Pio C. Guerrero and Associate Solicitor Marsha C. Ricon for respondent National Labor Relations Commission.

De Jesus Paguio and Manimtim for respondent.

MONTOYA, P. J.:

On April 24, 1997, Danilo Lazaro filed a complaint for illegal dismissal, non-payment of wages and bonus, reinstatement, backwages with moral and exemplary damages and attorney’s fees against Solidbank Corporation and its officers before the National Labor Relations Commission, NCR, Arbitration Branch. The case was docketed as NLRC NCR Case No. 00-04-03012-97.

On August 27, 1997, therein respondent Solidbank Corporation and its officers filed its position paper with a motion to strike out complaint. It argued that the complaint falls within the exclusive jurisdiction of the Regional Trial Court of Imus, Cavite, Branch 90, as it involves matters not related to labor. It also argued that petitioner voluntarily resigned from respondent Bank, thus there no longer exists an employer-employee relationship and any claim against respondent Bank should be filed with the regular courts.

The Labor Arbiter issued an Order on December 3, 1997 granting respondents’ Motion to Dismiss and held:

“Under these circumstances, it should be clear that the instant case involves questions offsets and issues that would require an extensive inquiry on the infra-corporate relationships between the complainant and the respondent bank, including the other individual respondents who are all high ranking officials of the aforesaid bank, and it would also require an extensive inquiry into the intra-corporate affairs of the aforesaid banking institution including its corporate policies, practices, and branch banking operations, for the proper resolution of the instant controversy, and such matters are clearly beyond the ambit of the Labor Arbiters’ jurisdiction under Article 217 of the Labor Code, as amended.

Complainant Lazaro filed an appeal before the NLRC assailing the propriety of the dismissal of the complaint.

On September 22, 1998, the NLRC issued a Resolution affirming in all respects the Order of the Labor Arbiter. Complainant filed a Motion for Reconsideration on October 2, 1998.

On November 20, 1998, the NLRC issued an Order remanding the case to the Labor Arbiter for further proceedings. The Order reads:

“This treats the motion for reconsideration filed by complainant-appellant anent our resolution promulgated on September 22, 1998, affirming the decision of Labor Arbiter Francisco A. Robles dated December 3, 1997, dismissing the complaint/or lack of jurisdiction.

Specifically, respondents-appellants pointed out in his (sic) motion for reconsideration that there is no intra-corporate conflict or controversy in the instant case as he was not elected to the position of Vice-President by the Board of Directors of respondent bank which makes him an ordinary employee and not a corporate officer.

We find this a material and substantial issue that was not thoroughly and deeply threshed out in the arbitration branch and such issue therefore has a material bearing on the merit of the case. Hence, to put all things in its proper perspective, we remand this case to the Labor Arbiter of origin for further proceedings.

WHEREFORE, in view of the foregoing, this case is REMANDED to the Labor Arbiter of origin for further proceedings with immediate dispatch.

SO ORDERED. “

Hence, this petition for certiorari by Solidbank Corporation, Deogracias N. Vistan, Rene V. Jazmines, Diwata C. Castanos and Jorge S. Payawal, raising the sole issue of:

“WHETHER OR NOT PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN REMANDING THIS CASE FOR FURTHER PROCEEDINGS BEFORE THE LABOR ARBITER IN ITS ORDER OF 20 NOVEMBER 1998, INSTEAD OF AFFIRMING THE DISMISSAL OF THE LABOR ARBITER FOR LACK OF JURISDICTION, AS IT EARLIER DID IN ITS ORDER OF 22 SEPTEMBER 1998.”

Accordingly to the records, respondent Danilo Lazaro was the Vice President, Head of the Branch Banking Group, Region VI of herein petitioner Solidbank Corporation. In 1996, he was constrained to tender his registration effective February 15, 1996 because his name was unnecessarily dragged by the ACES Audit Report into the Imus Branch anomaly involving P43 million pesos resulting in the filing of petitioner Bank of a criminal complaint for estafa thru falsification of public and commercial documents. It appears, however, that respondent Lazaro was not impleaded as an accused in the said criminal case.

Respondent Lazaro’s resignation was not accepted initially as he was made to continue working under the same position. Ten (10) months after, however, or on January 7, 1997, petitioner President Vistan informed respondent Lazaro that he is dismissed from employment effective November 30, 1996. Hence, the filing of the complaint before the Labor Arbiter.

Petitioners now contend that the complaint should have been dismissed since respondent Lazaro’s position as Vice President of the company at the time of his separation therefrom makes hint a corporate officer and, therefore, his complaint for illegal dismissal falls under the jurisdiction of the Securities and Exchange Commission. Petitioners maintain that the “jurisdiction of the SEC covers controversies involving the dismissal not only of the members of the board of directors of the company but also its high ranking officers“.

There is no merit in this petition. P.D. No. 902-A, Section 5, provides that:

“SECTION 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other/onus of association registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:

************************

(c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations.” (Emphasis supplied)

It is settled that the term “corporate officer” refers only to officers of a corporation who are given that character either by the Corporation Code or by the corporation’s by-laws (Ongkingco vs. NLRC, 270 SCRA 613; Tabang vs. NLRC, 266, 462). There are in fact other “officers” in a corporation whose positions are not provided in the Corporation Code or in the corporation’s by-laws such that the status of these so-called “officers” is that of ordinary employees of the corporation. Therefore, any dispute regarding their dismissal from the company falls under the jurisdiction of the NLRC. In the case at bar, even as herein petitioners admitted that respondent Lazaro held the position of Vice President, Head of the Branch Banking Group for Region VI, there was no evidence offered that would undoubtedly categorize respondent Lazaro as a corporate officer of petitioner Solidbank Corporation.

The burden is on herein petitioners to show proof that respondent Lazaro in fact is one of its corporate officers defined in the Corporation Code or as provided in their company by-laws to support its claim that the Securities and Exchange Commission has the proper jurisdiction over the illegal dismissal case filed by respondent Lazaro. In its Motion to Dismiss the complaint, however, petitioners failed to show any evidence on that matter. Petitioners, therefore, failed to substantiate their claim that the NLRC has no jurisdiction over the complaint.

On the other hand, the records show that respondent Lazaro started with Manila Banking Corporation in 1969 as a signature verifier clerk. He then became a Branch Manager and then the Head of Personnel for said Bank. Before the Manila Bank closed, respondent Lazaro was Head of its Cash Division. When Manila Bank closed, respondent Lazaro transferred to petitioner Bank in 1992 and was appointed as Head, Binondo Cash Department or Chief Cashier with AVP level. In May 1993, respondent Lazaro was appointed as Head of the Branch Banking Group in the Southern Luzon Region (Region VI). In December 1993, he was designated as Head of Branch Administration and Support Division concurrent with his other position. Later, in January 1994, he was again promoted to the rank of Vice President. Evidently, respondent Lazaro rose from the ranks as an ordinary employee of the Bank. Although he was promoted to higher positions, there is no showing that he became a member of the Board of Directors or even a stockholder of the Corporation. Clearly, therefore, he was not a corporate officer under either the Corporation Code or the by-laws of the Solidbank, hence the complaint for illegal dismissal filed by respondent Lazaro falls within the jurisdiction of the Labor Arbiter, not of the Securities and Exchange Commission.

WHEREFORE, this petition is hereby dismissed. Let this case be as it is hereby remanded to Labor Arbiter Francisco A. Robles for decision on the merits of the complaint filed by Lazaro against the petitioners.

SO ORDERED.

Solas and Velasco, Jr., JJ., concur.

Petition dismissed and the case remanded to the Labor Arbiter for decision on the merits.

CERTIFICATION

I hereby certify that this Decision was reached after due consultation among the members of the Division in accordance with the provisions of Section 13, Article VIII of the Constitution.

(SGD.) SALOME A. MONTOYA
Chairman, First Division

[SP No. 54044. March 1, 2000]

alberto itumay, rolly villaflor, rafael apostol, leoniso ludivese, jesus lizondra, adonis rangeodo, henry lizondra, henry lacanaria, daniel arias, bernard sayud, godofredo tundag, maximo tavera, george lumod, guilbert manalo, ricky duran, pedrito mendoza, cesar cojeda, manuel auza, rodel rogel, merlino tuban, alexander felizarta and netchito litrero, petitioners, vs. bureau of labor relations, samahan NO manggagawa SA kudos associated trade unions (ATU), and kudos metal corporation, respondents.

1. LABOR LAW: LABOR RELATIONS; LABOR ORGANIZATIONS; COLLECTIVE BARGAINING AGREEMENT; NATURE OF.—While the terms and conditions of a CBA constitute the law between the parties, it is not, however, an ordinary contract to which is applied the principles of law governing ordinary contracts. A CBA, as a labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which governs the relations between labor and capital, is not merely contractual in nature but impressed with public interest, thus, it must yield to the common good (Davao integrated Pan Stevedoring Services vs. Abarquer, 220 SCRA 197, 204).

2. ID; ID.; ID.: ID.; BUREAU OF LABOR RELATIONS; JURISDICTION.—The Bureau of Labor Relations and the Labor Relations Divisions in the regional offices of the Department of Labor shall have original and exclusive authority to act, at their own initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all disputes, grievances or problems arising from or affecting labor-management relations in all work places whether agricultural or non-agricultural, except those arising from the implementation or interpretation of collective bargaining agreements which shall be the subject of grievance procedure and/or voluntary arbitration (Art. 226 of the Labor Code).

3. ID.; ID.; ID.; REPRESENTATION ISSUE SHALL BE RESOLVED BY THE CONDUCT OF A CERTIFICATION ELECTION; CASE AT BAR— While it is true that apparently there is only one union (Samahan ng mga Manggagawa sa Kudos-Associated Trade Unions [ATU]), herein petitioners were allegedly former members of said union who formed another union (Kudos Metal Corporation Workers Union-NAFLU-KMU). Hence, the question presented is which faction or group of union commands the allegiance of the majority of the employees, as to entitle it to act as their bargaining representative. This question cannot be resolved except by certification election. The existence of a CBA cannot be a bar. where, by reason of a split within the union, the controlling group cannot be determined.

4. ID.; ID.; ID.; ID.; SUPERIORITY OF CERTIFICATION ELECTION TO VOLUNTARY RECOGNITION IN THE DETERMINATION OF THE COLLECTIVE
REPRESENTATION STATUS OF A UNION.—The certification election is the most democratic and expeditious method by which the laborers can freely determine the union that shall act as their representative in their dealings with the establishment where they are working. Any union sure of the support of the workers would have no reason to resist the holding of a certification election where it can expect a vote of confidence from them for its effort and ability to improve their interests (National Assn. of Free Trade Unions vs. Bureau of Labor Relations. 164 SCRA 12. 17).

ORIGINAL ACTION in the Court of Appeals.

The facts are stated in the opinion of the Court.

Flores Saledero Bunao and Olalia Law Offices for petitioners.

Solicitor General Ricardo P. Galvez, Assistant Solicitor General Maria Aurora P. Cortes and Associate Solicitor Gabriel Francisco A. Ramirez, Jr. for respondent Bureau of Labor Relations.

SALAZAR-FERNANDO, J.:

This is a Petition for Certiorari which seeks to annul, reverse and nullify the Resolutions of the Bureau of Labor Relations in BLR-A-TE-23-07-98 dated February 5, 1999 and March22, 1999, the dispositive portions of which reads as:

1. February 5, 1999

‘WHEREFORE, the appeal is hereby DISMISSED for lack of merit and the order of the Regional Director dated 17 April 1998 is AFFIRMED in its entirety.”

2. March 22, 1999

“WHEREFORE, the motion for reconsideration is DENIED for lack of merit and our resolution dated 05 February is AFFIRMED in its entirety.
No further motions of a similar nature shall be entertained.”

The factual background of the case is as follows:

Sometime in April 1997, petitioners, representing the rank and file employees of Kudos Metal Corporation, organized a union named “Kudos Metal Corporation Workers Union-NAFLU-KMU”. They filed a petition for certification election before the Med-Arbitration Unit of the Department of Labor and
Employment (DOLE), National Capital Region.

Respondent company filed an Answer to the petition and alleged that there was a labor union, the Samahan Manggagawa sa Kudos-Associate Trade Union, recognized by the company with which they already had a Collective Bargaining Agreement (CBA).

Petitioners filed a petition for the declaration of nullity or annulment of said CBA with the Industrial Relations Divisions of DOLE-NCR on August 29, 1997.

The petition alleged that: they were surprised to learn about the existence of the CBA since they never joined the respondent union neither did they authorize the same to negotiate a CBA; they never affixed their signatures in ratification of the said CBA and their supposed signatures therein were not given voluntarily and freely; the affidavit of registration of the said CBA was falsified and fraudulently acquired since the employees were made to sign a blank paper purportedly as proof that they received production bonus from the company which turned out later that certain words were typed above their signatures to make it appear that they were ratifying a CBA; the said CBA was not posted at any conspicuous place in the company for the perusal, study and ratification of the rank-and-file employees; the CBA was designed to frustrate their right to self-organization; the CBA was supposed to have been concluded on March 3, 1995 yet DOLE-NCR purportedly received the same on January 31, 1995 or earlier than its date of signing or conclusion; the CBA was a sweetheart deal since the benefits given therein were too minimal compared to the profits earned by respondent company; respondent union was never certified as the sole and exclusive bargaining agent in respondent company in a certification election duly conducted by the DOLE since direct recognition is no longer allowed; the signatories in the subject CBA purporting to be members of the union negotiating panels were all supervisory employees in the company, hence, disqualified to negotiate the CBA on behalf of the rank-and-file employees; and the petition was supported by more than 50% of the rank-and-file employees in the company.

In an Order dated April 17, 1998 of the Regional Director, Maximo B. Lim, DOLE-NCR, the petition was denied for lack of merit finding guidance on the provisions of Department Order No. 09 (series of 1997). The same was appealed to the Bureau of Labor Relations.

Private respondents opposed the petition on the ground of lack of jurisdiction on the part of public respondent. They maintained that; the questioned CBA was a result of voluntary recognition extended by the employer to respondent union; the said CBA was merely a renewal of the first CBA concluded by the same  parties in March 1990; and both CBAs were duly registered with the Department of Labor and Employment in accordance with registration requirements then prevailing.

Public respondent in denying the appeal of petitioners stated that: the appeal was readily dismissible the declaration of nullity of the CBA, being a contract, was a judicial function within the exclusive and original jurisdiction of regular courts; Department Order No. 09 provided clearer guidelines to simplify procedures on the implementation and application of labor laws consistent with the State policy of promoting trade unionism through self-organization and collective bargaining to enhance industrial peace; considering that no petition for certification election was filed during the freedom period of the first CBA, it follows that respondent union retained its majority status; it would be iniquitous to declare ineffectual a CBA which had been enforced for more than two years on the basis of a petition filed by a union which had not acquired legitimate personality at the time the CBA was concluded; to declare the CBA ineffectual would be moot and academic considering that the employees had already enjoyed benefits from it for years; and on the issue of alleged fraud and misrepresentation in obtaining the ratification signatures, there was no convincing proof to support petitioners’ claim that would warrant consideration of the appeal.

Petitioners moved for the reconsideration of the denial order of the public respondent alleging that public respondent failed to discuss the major point raised in the appeal; Department Order No. 09 was not applicable to the case since it had no retroactive effect; under Executive Order No. 111, direct certification was disallowed, thus, the voluntary recognition by the company to respondent union and the CBA was not valid; and estoppel cannot set against them since they were never aware of the existence of the CBA until they filed a Petition for Certification Election.

The motion for reconsideration of petitioners was denied by public respondent in its Resolution dated March 22, 1999.

Hence, this petition.

The following are the legal issues raised:

“1.  Can a labor organization be voluntarily recognized by a company as bargaining agent of the latter’s employees without any certification election being conducted at the time that Executive Order No. Ill was still in effect?

2. Can the provisions of Department Order No. 9, Series of 1997 be given retroactive effect?

3. Would a CBA entered into between a company and a voluntarily recognized labor union be valid and binding among the union members?

4. Who has jurisdiction over cases for the annulment of a CBA and the cancellation of its registration?”

The petition cites the following:

“REASONS RAISED IN SUPPORT OF THE INSTANT PETITION THE PUBLIC RESPONDENT SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN:

1. HOLDING THAT THE BLR HAS NO JURISDICTION TO ORDER THE NULLIFICATION OF A CBA.

2. RULING THAT THE SUBJECT CBA IS VALID AND BINDING SINCE IT COULD BE INIQUITOUS TO DECLARE THE SAME INEFFECTUAL.

3. NOT HOLDING THAT THE SUBJECT CBA IS INEFFECTUAL SINCE THE VOLUNTARY RECOGNITION EXTENDED BY RESPONDENT COMPANY TO RESPONDENT LABOR ORGANIZATION WAS NOT ALLOWED UNDER EXECUTIVE ORDER NO. 111.

4. FAILING TO HOLD THAT THERE ARE SEVERAL FACTORS WHICH PRIVATE RESPONDENT DID NOT DENY SHOWING THAT THE SUBJECT CBA WAS FRAUDULENTLY EXECUTED.”

On the issue of jurisdiction, public respondent ruled that declaration of nullity of a collective bargaining agreement, being a contract, is a judicial function within the exclusive and original jurisdiction of regular courts.

The ruling is devoid of merit.

The Supreme Court held that:

“While the terms and conditions of a CBA constitute the law between the parties, it is not, however, an ordinary contract to which is applied the principles of law governing ordinary contracts. A CBA, as a labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which governs the relations between labor and capital, is not merely contractual in nature but impressed with public interest, thus, it must yield to the common good.”

Art 226 of the Labor Code\ as amended, the Bureau of .Labor Relations (BLR), of which the med-arbiter is an officer, has the following jurisdiction

“Art 226. Bureau of Labor Relations.— The Bureau of Labor Relations and the Labor Relations Divisions in the regional offices of the Department of Labor shall have original and exclusive authority to act, at their own initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all disputes, grievances or problems arising from or affecting labor-management relations in all work places whether agricultural or non-agricultural, except those arising from the implementation or interpretation of collective bargaining agreements which shall be the subject of grievance procedure and/or voluntary arbitration.

The Bureau shall have fifteen (15) working days to act on labor cases before it, subject to extension by agreement of the parties.”

With the above pronouncement of the High Tribunal and by the express provision of the law, the Bureau of Labor Relations should not be allowed to defeat the ends of justice by its own proclamation that it was without jurisdiction to decide the case. Facts of the case clearly reveal that the issue is primarily a labor case.

In the absence of an employer-employee relationship between the parties, the civil courts have authority to assume jurisdiction over the case.

Granting for the sake of argument that petitioners were aware of the existence of respondent union and the prevailing collective bargaining agreement, this should be taken as a schism within the majority union (respondent union). Here, a question of representation is clearly presented.

While it is true that apparently there is only one union Samahan ng mga Manggagawa sa Kudos-Associated Trade Unions [ATU]), herein petitioners were allegedly former members of said union who formed another union (Kudos Metal Corporation Workers Union-NAFLU-KMU). Hence, the question presented is which faction or group of union commands the allegiance of the majority of the employees, as to entitle it to act as their bargaining representative. This question cannot be resolved except by certification election. The existence of a CBA cannot be a bar, where, by reason of a split within the union, the controlling group cannot be determined in keeping with the pronouncement of the Supreme Court, to wit:

“1. *** problem that had to be faced was the ascertainment, considering the changed circumstances of which labor organization should represent the entire labor force of the Atlantic Gulf and Pacific Company. What better is there than to hold a certification election? **”

2. A semblance of plausibility is sought to be imparted in the petition by the allegation of a contract bar rule. The certification issued on February 5. 1975 by Acting Director Carmelo C. Noriel of respondent Bureau is worried in its entirety thus: “[Pursuant] to Title VII. Article 277 of Presidential Decree No. 442 which came into effect on November 1, 1974, otherwise known as the Labor Code of the Philippines, the Collective Bargaining Agreement entered into by and between:*** on January 15, 1975 is hereby [certified] as duly filed in this Office, to serve asthe basic covenant between the parties above-indicated and shall have the force and effect of law between the parties during the period of its duration from 15 January 1975 to 31 December 1977, [provided] that there is no pending petition for Certification Election with the Bureau (if Labor Relations and there is no pending request for union recognition by any other union with the management upon issuance of this Certificate.” What petitioner ignored is the proviso as to the pendency of a petition for certification election, which in itself would bar the operation of the contract bar rule. From his decision of April 14, 1975, the reconsideration of which was denied on December 17, 1975, it was made clear that while a previous petition for certification election did not prosper, it could not be considered terminated as there was an appeal still to be decided. The requirement of the proviso was, therefore, duly satisfied. Petitioner, moreover, apparently had lost sight of the principle that the contract bar rule is not to be applied with rigidity.”

Another issue was the validity of the direct certification of respondent union by respondent company.

Petitioners contend that since direct certification was not allowed when Executive Order No. Ill, which amended Article 257 of the Labor Code, was still in effect, with more reason that voluntary recognition be not allowed. Respondent company, on the other hand, argues that the contention of petitioners’ counsel that voluntary recognition was removed as a method of selection of a bargaining representative is highly misplaced since under
the present dispensation, it is direct certification that had been emasculated and not voluntary recognition.

Records of the case don’t show whether there was direct certification or voluntary recognition except in the Resolution dated February 5, 1999 of the Bureau of Labor Relations which states “Both appellees opposed the petition on the ground of lick of jurisdiction on the part of the Bureau of Labor Relations, In addition, appellees maintained that the questioned CBA is a result of voluntary recognition extended by the employer to appellee union; *•*.

Whether it was direct certification or voluntary recognition, the fact remains that a group of employees, who were allegedly signatories, are now questioning the collective representation of respondent union.

During the effectivity of Executive Order No. 111, the Supreme Court upheld the superiority of the certification selection when it held that:

“It remains to stress, as we have repeatedly declared in earlier decisions, that the certification election is the most democratic and expeditious method by which the laborers can freely determine the union that shall act as their representative in their dealings with the establishment where they are working. Any union sure of the support of the workers should have no reason to resist the holding of a certification election where it can expect a vote of confidence from them for its effort and ability to improve their interest.”

In conclusion, the ruling of public respondent that it was without jurisdiction in the present case runs counter to the provision of the law. Article 226 of the New Labor Code cannot be misread to signify that the authority conferred on the Secretary of Labor and the officials of the Department is limited in character. On the contrary, even a cursory reading thereof readily yields the conclusion that in the interest of industrial peace and for the promotion of salutary constitutional objective of social justice and protection to labor, the competence of the governmental agencies entrusted with
supervision over disputes involving employers and employees as well as inter-union and intra-union conflicts’ is broad and expansive.”

WHEREFORE, in view of the foregoing, the Resolutions dated February 5, 1999 and March 22, 1999 of public respondents are hereby ‘ reversed and set aside. This case is hereby remanded to public respondent for further proceedings.

SO ORDERED.

Sandoval Gutierrez. and Valdez, Jr., JJ., concur.

Resolution reversed and set aside remanding the case to the public respondent for further proceedings.

CERTIFICATION

This is to Certify that this Decision was reached after due consultation among the members of this Division in accordance with the provision of Section 13, Article VIII of the Constitution.

(SGD.) ANGELINA SANDOVAL GUTIERREZ
Associate Justice
Chairman

[SP No, 51627. January 26, 2000]

FILCON MANUFACTURING CORPORATION, petitioner, vs. AVA JOSEPHUS B. JIMENEZ, as Public Respondent and MAKAPA-FIL-UWP (MANGGAGAWA PARA SA KAGALINGAN AT PAGBABAGO SA FILCON-UNITED WORKERS OF THE PHILIPPINES, as Private Respondent, respondents.

  1. LABOR LAWS; EMPOYER-EMPLOYEE RELATIONS; RETRENCHMENT; TO IMPART CONSTITUTIONAL POLICY OF “FULL PROTECTION TO LABOR” RETRENCHMENT MUST BE EXERCISED AS A MEASURE OF LAST RESORT.—In order to impart operational meaning to the constitutional policy of providing “full protection” to labor, the employer’s prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means – e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc.—have been tried and found wanting (Lopez. Sugar Corporation vs. Federation of Free Workers, 189 SCRA 179, 187).
  2. ID.; ID.; ID.; THAT THE COMPANY IS UNDERGOING FINANCIAL DIFFICULTIES MUST BE PROVED WITH CERTAINTY TO JUSTIFY WORKDAY REDUCTION.—The decision to reduce workdays is not invalid per se. It is recognized as a less drastic means to cut down on labor costs compared to retrenchment or the closing down of an enterprise. What is crucial, however, is the proof that the company is undergoing financial difficulties necessitating such workday reduction. Considering that the employees are deprived of wages for every workday that is reduced, the financial losses must be proven with certainty and to an extent that it is clear that the employer has no other choice but to reduce its working days.
  3. ID.; ID.; ID.: NOT ALL BUSINESS LOSSES WOULD JUSTIFY RETRENCHMENT OF EMPLOYEES— In cases of retrenchment, not all business losses suffered by the employer would justify retrenching employees under Article 283 of the Labor Code. The loss cannot be just any kind of amount of loss; otherwise, a company could easily feign excuses to suit its whims and prejudices or to rid itself of unwanted employees (Bogn-Medella Sugarcane Planters Association, Inc. vs. NLRC. 296 SCRA 108. 119). We can apply by analogy the foregoing standard even if this is strictly not a case of retrenchment, since the Supreme Court has stated that where a company suffers great financial losses such that it has no choice but to resort to reassignment of its employees to lower positions, or to reduction of working hours and days, eventually resulting in retrenchment or virtually depriving them of their jobs by gradual diminution of salaries and benefits, there is constructive dismissal, which would warrant an award of separation pay (Leinerv Savings & Loan Bank vs. NLRC, 205 SCRA 492. 498}.
  4. ID.; ID.; ID.; ID.; ALLEGATIONS OF ECONOMIC OR BUSINESS REVERSES ARE IN THE NATURE OF AFFIRMATIVE DEFENSE WHICH EMPLOYER MUST PROVE WITH CLEAR AND SATISFACTORY EVIDENCE—In the nature of things, the possibility of incurring losses is constantly present, in greater or lesser degree, in the carrying on of business operations, since some, indeed many, of the factors which impact upon the profitability or viability of such operations may be substantially outside the control of the employer (San Miguel Jeepney Service vs. NLRC. 265 SCRA 35, 45}. Hence, the employer bears the burden of proving his allegation of economic or business reverses with clear and satisfactory evidence, it being in the nature of an affirmative defense (San Miguel Jeepney Service vs. NLRC. supra).

ORIGINAL ACTION in the Court of Appeals.

The facts are stated in the opinion of the Court.

Francisco B. Bayona for petitioner.

Renato P. Pastrana for respondent United Workers of the Philippines.

Solicitor General Ricardo P. Galvez, Assistant Solicitor General Ramon G. del Rosario and Associate Solicitor Beatrice A, Caunan-Medina for respondent.

VIDALLON-MAGTOLIS, J,:

In this petition for certiorari, petitioner Filcon Manufacturing Corporation (Filcon) questions the decision rendered by Voluntary Arbitrator Josephus Jimenez on February 17, 1999, in Case No. JBJ-AVA-098-12-15, the dispositive portion of which reads as follows:

“WHEREFORE, responsive to all the foregoing premises, judgment is hereby rendered in favor of the union and against the company, hereby declaring that the company’s act of unilaterally reducing workdays, without prior notice to the union and to the employees, much less an advanced notice to DOLE, and without any supporting financial statements, was neither justified nor valid, thus hereby directing said company to pay the individual employees affected based on the formula herein above-cited, and to submit to this office competent proof to compliance herewith within ten (10) working days after the finality of this decision.

“SO ORDERED.”

THE ANTECEDENT FACTS

Gathered from the records of the instant case are the following antecedent facts:

On June 25, 1998, petitioner Filcon issued a memorandum2 to all employees, announcing that starting July 4, 1998, the number of working days will be reduced from six (6) days to four (4), such that there will be no more work every Saturday. It was further announced that such reduction will only be a “temporary working schedule”, and that those who will not go to work can charge their absences to their vacation or sick leaves. Filcon accredited the reduction of working hours to the weakening sales of their goods.

Prior to that, or on June 10, 1998, Ramon Ong, Filcon’s Managing Director, sent a letter to the Filcon Employees Union-SWAT (FEU-SWAT), the incumbent bargaining agent, informing it of the said work-reduction scheme, and directing it to address any concern to Mr. Jerrold Lao as soon as possible.

Around two months later, or on September 16, 1998, a certification election was conducted among the rank-and-file employees of Filcon, where the private respondent-union garnered the majority votes cast. Hence, the private respondent became the new sole and exclusive bargaining agent of all the rank-and-file employees at Filcon.

The next day, on September 17, 1998, Filcon again issued a memorandum” to all employees, announcing another workday reduction in view of the loss sales volume. It ordered that starting September 21, 1998, the 5-day work schedule would be reduced to four (4) days, such that there would be no more work scheduled every Friday and Saturday.

Filcon also sent a Notice of Working Days Reduction to the Department of Labor and Employment (DOLE) in a letter dated September 14, 1998, stating the effectivity date of its work reduction scheme from six (6) days to four (4) and the underlying reasons therefor. On November 13, 1998, the petitioner also submitted to the DOLE a list of workers affected by the implemented 4-day work schedule. The private respondent then filed a case questioning the validity of the workday reduction. Subsequently, the parties executed a Submission Agreement on December 14, 1998, wherein they designated the public respondent as the arbitrator in their controversy. The initial hearing was scheduled on January 18, 1999, and position papers were required to be filed by February 4, 1999. On February 17, 1999, the public respondent promulgated the questioned decision.

THE ISSUES

Hence, this petition, where the petitioner-company submits the following assignment of errors for consideration by this court:

  1. THE HONORABLE VOLUNTARY ARBITRATOR GRAVELY ERRED IN FINDING THAT THE DECISION OF THE COMPANY REDUCING THE WORKDAYS FROM SIX (6) DAYS TO FOUR (4) DAYS A WEEK WAS EXERCISED IN A MALICIOUS, HARSH, OPPRESIVE, VINDICTIVE OR WANTON MANNER OR OUT OF MALICE OR SPITE.
  2. THE HONORABLE VOLUNTARY ARBITRATOR GRAVELY ERRED IN FINDING THAT THE COMPANY FAILED TO INFORM THE EMPLOYEES IN ADVANCE, MUCH LESS SEEK THEIR PARTICIPATION IN THE DECISION TO REDUCE THE WORKING DAYS.
  3. THE HONORABLE VOLUNTARY ARBITRATOR GRAVELY ERRED IN FINDING THAT THE COMPANY EXCEEDED THE LIMITS OF ITS MANAGEMENT PREROGATIVES AS ACCORDING TO HIM, SAID PREROGATIVES WERE EXERCISED IN BAD FAITH MERELY FOR THE PURPOSE OF DEFEATING OR CIRCUMVENTING THE RIGHTS OF THE EMPLOYEES UNDER SPECIAL LAWS OR UNDER VALID AGREEMENT AND NOT SOLELY FOR THE ADVANCEMENT OF THE COMPANY’S LEGITIMATE INTEREST.
  4. THE HONORABLE VOLUNTARY ARBITRATOR GRAVELY ERRED IN FINDING THAT THE COMPANY HAS MISERABLY FAILED TO ESTABLISH FACTUAL BASIS TO JUSTIFY THE REDUCTION OF WORKING DAYS.
  5. THE HONORABLE VOLUNTARY ARBITRATOR RAVELY ERRED IN FINDING THAT THE EXERCISE OF THE COMPANY’S PREROGATIVES WAS NOT DONE IN A VALID WAY.
  6. THE HONORABLE VOLUNTARY ARBITRATOR GRAVELY ERRED IN FINDING THAT THE EMPLOYEES ARE ENTITLED TO THE RELIEF AS PRAYED FOR.

ARGUMENTS OF THE PETITIONER

The petitioner argues in its first assigned error that its decision to reduce the workdays was done in good faith, without malice nor tainted with vindictiveness. According to the petitioner, it was obvious that the reduction of workdays was brought about by the global economic crisis, which is of public and judicial knowledge. Even the public respondent admitted his awareness of the financial difficulties in Philippine business. Hence there was no bad faith involved in the decision to cut the working days to four (4).

As for the second assignment of error, the petitioner counters that, contrary to the finding of the public respondent, it informed its employees of the impending workday reduction, as evidenced by Annexes “C” and “D”.” In Annex “C”, the reduction of working days from six (6) to five (5) was .announced to all employees on June 25, 1998, which was going to be effective on July 4, 1998. In Annex “D”, the reduction of working days from five (5) days to four (4) was announced on September 17, 1998, which was to be effective on September 21, 1998.

The petitioner further argues in its third assigned error that its decision to reduce workdays was only temporary unlike in retrenchment or in closure where the employer- employee relationship is severed forever. Hence, the cases cited by the public respondent are not in point since they all referred to retrenchment and termination due to business closure.

In addition, the petitioner argues in its fourth assignment of error that the financial statements submitted by the private respondent covered only the period from 1994-1997. No documents were submitted by the private respondent to show the financial condition of the petitioner in 1998, which is the relevant period in this case. On the other hand, the petitioner submitted documents amply supporting its position-that poor and declining business operations necessitated the adoption of precautionary measures to arrest such decline, leading to the implementation of the various discount sales and reduction of workdays.

As for the fifth assignment of error, the petitioner contends that its exercise of a management prerogative, i.e., the reduction of workdays, was validly implemented, as shown by the following:

1) it notified its employees of its decision to reduce the workdays in a Memorandum dated June 25, 1998. and in a Memorandum dated September 17, 1998; and

2) it notified the DOLE of such reduction in a notice dated September 14. 1998.

The petitioner further argues that the fact that the effectivity of the workday reduction took place after the certification election where the private respondent won as the new bargaining agent is of no significance as the decision to reduce the workdays from (6) days to four (4) had been conceived by the petitioner long before the said certification election was conducted.

Lastly, the petitioner avers in its sixth assignment of error that the employees are not entitled to the relief prayed for, as the public respondent conveniently and intentionally ignored the evidence it submitted to disprove the private respondent’s allegations. The petitioner contends that Annexes “I”,”J”,”K” and “L” clearly show that its business operations incurred losses in 1998. And when it realized this downward trend of its business operation, it resorted to measures that would alleviate its “sick” condition to prevent further losses, hence its decision to reduce the workdays in a week.

ARGUMENTS OF THE PRIVATE RESPONDENT

The private respondent submitted its Comment on April 8, 1999. However, it failed to effectively send a copy thereof to the petitioner’s counsel by using an address different from that found in the petition. Hence, we ordered in a Resolution dated May 31, 1999″ to expunge the same from the record. We are thus constrained to rule on this petition without the said Comment.

THE COURT’S RULING

The main issue to be resolved in the instant case is the validity of the decision of the petitioner to reduce the number of working days of its employees. The petitioner claims that it did so in good faith and in view of the financial difficulties it was experiencing. On the other hand, the public respondent found that while the decision to reduce workdays is inherently a management prerogative, such reduction was invalid and unjustified in view of the following: the failure to inform the employees in advance and to seek their participation regarding such matter; the failure to inform the dole in advance before such reduction; and the lack of factual basis which would support the contention that financial difficulties necessitated such reduction.

Unlike a company’s managerial prerogative to retrench employees on the ground of serious and imminent business losses, there are no guidelines provided in the Labor Code regarding a company’s managerial prerogative to reduce the working days of its employees. The Supreme Court has yet to squarely rule on the issue before us.

The 1985 Explanatory Bulletin of then Director Augusto Sanchez on the “Effect of Reduction of Workdays on Wages/Living Allowances” states that:

Right to Reduce Workdays. In situations where the reduction in the number of regular working days is resorted to by the employer to prevent serious losses due to causes beyond his control, such as when there is a substantial slump in the demand for his goods or services or when there is lack of raw materials, it is the view of this Bureau that such reduction is valid. Such management action appears to be more humane and in keeping with sound business operations than the outright termination of the services of the employees or the total closure of the enterprise. In this jurisdiction, it is generally recognized that an employer has the prerogative to devise and adopt necessary remedial measures to save his business from serious losses that may eventually result in its total collapse. This prerogative of an employer flows from the right of ownership of property which includes the right of an employer to manage, control and protect his property in a manner that is not contrary to law, morals and public policy. If the law recognizes the right of an employer to terminate the services of his employees and even to close his enterprise if it is suffering from serious losses for reasons beyond his control, the right to reduce the number of workdays of his employees may be conceded to him, which management action is less severe in terms of its effect on the earnings of the employees than their outright lay-off or terminate, or the closure of the enterprise.

Reduction of Wage/Allowances. In situations described above, this Bureau is also of the view that the employer may deduct the wages and living allowances corresponding to he days taken off from the workweek, in the absence of an agreement’ specifically providing that a reduction in the number of workdays will not adversely affect the remuneration of the employees. ***

“This bulletin does not cover cases where there are existing agreements or employer policy or practice providing for more liberal benefits than those that would result with the application of the opinions or guidelines set forth herein in case of reduction of workdays. It also does not contemplate of situations where the employer has unilaterally reduced the number of working days, although the business is not suffering from losses or there is available work to be done by the employees, and which reduction will alter the agreement or understanding of the parties as to the number of working days that the employees will work in a week or within a payroll period. Furthermore, the explanations herein assume that the reduction of workdays and the corresponding wage/ allowance deductions are done in good faith, justified by circumstance affecting the business of the employer, and are not resorted to for the purpose of defeating or circumventing the provisions of existing laws, applicable individual or collective agreement or any existing practice or policy obtaining in the establishment.”

The Supreme Court has also held that in order to impart operational meaning to the constitutional policy of providing “full protection” to labor, the employer’s prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means — e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc.—have been tried and found wanting. Furthermore, the Supreme Court has explained that:

“In this case, it is admitted that private respondent had not been terminated or retrenched by petitioner but that due to financial crisis the number of working days of private respondent was reduced to just two days a week. Petitioner could not have been expected to notify DOLE of the retrenchment of private respondent under the circumstances for there was no intention to do so on the part of petitioner.”

It is clear from the foregoing that the decision to reduce workdays is not invalid per se. It is recognized as a less drastic means to cut down on labor costs compared to retrenchment or the closing down of an enterprise. What is crucial, however, is the proof that the company is undergoing financial difficulties necessitating such workday reduction. Considering that the employees are deprived of wages for every workday that is reduced, the financial losses must be proven with certainty and to an extent that it is clear that the employer has no other choice but to reduce its working days.

A close scrutiny of the records of this case reveals that the petitioner-company failed to substantially prove its allegation that it has suffered losses in 1998 to an extent that would justify its reduction of working days. The only proof submitted by the petitioner in its position papers were the following: a schedule of comparative gross sales for the years 1994-1998, which showed that there was a 25% decrease in the domestic and export gross sales for the year 1998; the contracts of lease with different stores where the petitioner leased space to hold its discount sales; the flyers announcing its discount sales of Converse shoes; receipts purportedly showing the unsold goods returned to the petitioner and the various documents stating its outstanding loans with several banks and its shortened payment terms. These do not substantially prove that the petitioner suffered serious losses to warrant the reduction of working days of its employees. Of course the petitioner has attached to its petition its Balance Sheet for the year 1997 and 1998, together with the Comparative Income Statement and the Comparative Statement of Cost of Goods Sold for the same period. We cannot consider such attachments when these were not presented in the proceedings below.

“To allow a party to attach any document to his pleading and then expect the court to consider it as evidence may draw unwarranted consequences. The opposing party will be deprived of his change to examine the document and to object to its admissibility. The appellate court will have difficulty reviewing documents not previously scrutinized by the court below.””

The petitioner explained that it had difficulty finalizing its financial statements prior to the deadline given by the public respondent to submit its position paper. That is not enough of an excuse to warrant its non-submission of relevant documents. It could have filed for a motion for additional time to submit its position paper, or submitted its books of account or a partial financial statement to show its alleges losses. But it did not.

And even assuming arguendo that we can consider the financial statements attached to the petition, we find the same insufficient to prove business losses on the part of the petitioner necessitating the reduction of working days of its personnel. The Supreme Court has time and again ruled that in cases of retrenchment, not all business losses suffered by the employer would justify retrenching employees under Article 283 of the Labor Code. The loss cannot be just any kind or amount of loss; otherwise, a company could easily feign excuses to suit its whims and prejudices or to rid itself of unwanted employees. We can apply by analogy the foregoing standard even if this is strictly not a case of retrenchment, since the Supreme Court has stated that where a company suffer great financial losses such that it has no choice but to resort to reassignment of its employees to lower positions, or to reduction of working hours and days, eventually resulting in retrenchment or virtually depriving them of their jobs by gradual diminution of salaries and benefits, there is constructive dismissal, which would warrant an award of separation pay.

Moreover, it must be emphasized that in the nature of things, the possibility of incurring losses is constantly present, in greater or lesser degree, in the carrying on of business operations, since some, indeed many, of the factors which impact upon the profitability or viability of such operations may be substantially outside the control of the employer. Hence, the employer bears the burden of proving his allegation of economic or business reverses with clear and satisfactory evidence, it being in the nature of an affirmative defense.

There being lack of clear and convincing evidence to prove the petitioner’s claim of losses sufficient enough to justify the reduction of working days of its employees, we have no other recourse but to affirm the findings of the public respondent. While we note that the petitioner did notify its employees one week in advance before the workday reduction and that it notified the DOLE in its second instance of workday reduction, we still cannot validate such reduction in view of the insufficient evidence presented.

WHEREFORE, the instant petition is hereby DENIED and accordingly DISMISSED for lack of merit. The prayer for a writ of preliminary injunction is also DENIED.

So ORDERED.

Abesamis and Gow-Dadole*. JJ., concur.

Petition denied and accordingly dismissed.

CERTIFICATION

I hereby certify that this Decision was reached after due consultation among the members of this Division in accordance with the provisions of Section 13, Article VIII of the Constitution.

(SGD.) DEILALAH VIDALLON-MAGTOLIS
Associate Justice
Chairman, Fourteenth Division


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